How to increase profit by

understanding your customers

You may think you already understand what your customers

want but…..• 80% of business owners think they deliver a good customer

experience• 8% of customers think they get a good experience

Yes, but we don’t get many complaints so our customers are

happy……..• For every 100 customers who are not happy……• 96 won’t complain – so you don’t know they are not happy!• 91 will stop doing business with you when they find a competitor they

think is better

Why bother understanding your customers?

• If you understand your customers, then you know what level of service they expect from you

• If you deliver that level of service, you will have more customers, they will spend more with you, will recommend you and will complain less

• That gives you more income and lower costs meaning higher profits• Research by Deloitte and Touche found that customer centric

companies are 60% more profitable than those who don’t focus on the customer.

Proof that it works…For the first 18 years it was in business, Ryanair specialised in being “cheap and nasty”. Focusing on price rather than customer experience, the CEO Michael O’Leary claimedhe didn’t care if no-one liked him (well, words to that effect anyway!).In September 2013 they changed direction – forced to by rapidly reducing profits, admittedly, but they decided to “stop doing things that unnecessarily piss people off”. They announced a 32% increase in profits for the first half of 2014, and expect profits for the full year to be 45% higher than in 2013. Not only that, they have also seen a 40% drop in customer complaints.

And here are some more facts…• The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new

prospect is 5-20% – Marketing Metrics. • It costs 6–7 times more to acquire a new customer than retain an existing one – Bain & Company• The average spend for a new customer is less than half that of an existing customer – McKinsey.• 70% of buying experiences are based on how the customer feels they are being treated – McKinsey.• A customer is 4 times more likely to defect to a competitor if the problem is service-related than price-

or product-related – Bain & Company.• A dissatisfied customer will tell between 9-15 people about their experience. Around 13% of

dissatisfied customers tell more than 20 people. – White House Office of Consumer Affairs.• It takes 12 positive experiences to make up for one unresolved negative experience – “Understanding

Customers” by Ruby Newell-Legner.• Happy customers who get their issue resolved tell about 4-6 people about their experience. – White

House Office of Consumer Affair.• Customers who rate you 5 on a scale from 1 to 5 are six times more likely to buy from you again,

compared to ‘only’ giving you a score of 4.8. – TeleFaction data research.

Deciding who your customers are• Many businesses have a clear idea of the type of customer they want

to do business with, often segmenting them by what products or services they would use, what distribution channels they prefer, how much they would spend and how frequently.

• Delivering brilliant service isn’t about understanding what your customers look like, it’s about understanding how they want to do business with you – what their needs and expectations are.

• There are 4 customer groups to consider – potential, existing, former, and, most importantly, staff.

There are only 5 basic rules1. Ask for feedback – talk to and listen to your customers2. Understand the customer journeys3. Make changes to your business using the customer feedback4. Tell customers what you have changed5. Don’t stop!

Easy ways to listen to customers• Make it easy for your customers to give you feedback – set up an e-mail

address or phone number and include it on all customer communications• Ask your staff what customers are saying – they are the people who talk to

customers all the time. Asking them what customers are happy and unhappy about not only gives you an up to the minute view but also motivates your staff as they feel involved and valued.

• Ask your customers – this can be a simple survey, asking such questions as “what do we do well?”, “what can we improve?” and “how did you feel?” Or simply pick up the phone or go and see them and ask the same questions.

• Review any complaints or comments – don’t just look at those your business gets directly, but check out social media such as Twitter to see what people are saying about your business.

Understanding what customers want

• There are only 6 things that ALL customers want:1. Make it easy2. Set my expectations3. Keep your promises4. Keep me informed5. Treat me as an individual6. Put it right if it goes wrong

Understanding the customer journey• Looking at your business through your customers’ eyes can be

difficult, but is normally invaluable• Drawing the journey as a map helps you to understand how easy you

are to do business with – how the different steps a customer can take flow together (or not) and how much effort they have to make

• Try to involve someone who doesn’t know your business well – it is hard for someone with good business knowledge to think as a customer

Current journey

Referrals

Email campaign

Networking

Exhibitions

3rd party sites

Website

Customer completes contact form

Pricing proposal

Email or post

Webinar

Product demo

E-mails and phone to arrange installation

No

YesPaperwork completed

F2F training

Provider bills

Agrees to buy?

Problems or issues?

No

Yes

E-mails and phone calls to resolve with provider

Contact to get renewal

Customer renews?

Yes

NoHandover with new consultant

Recommended journey

Referrals

Email campaign

Networking

Exhibitions

3rd party sites

Website

Customer completes contact/needs form

Pricing proposal

Email or post

Webinar

Product demo

E-mails and phone to arrange installation

No

YesPaperwork completed

F2F training

Provider bills and quarterly monitoring report, referral request

Agrees to buy?

Issues?

No

Yes

E-mails and phone calls to resolve with provider

Contact to get renewal

Customer renews?

Yes

No

Handover

Customer feedback request

New needs identified?

Yes

No

Customer feedback request

Regular communication based on needs

Conversion up 100%

Retention up 80%

Understanding customers isn’t enough

• 95% of businesses say they listen to their customers• 30% of those plan to make changes using customer feedback• Only 10% actually make any changes• And only 5% tell their customers about the changes they have made

Understanding your customers is like sat nav….

• You have a business plan which shows where you want to go and how you are going to get there

• That’s like setting off on a car journey, having consulted a road atlas, worked out what seems to be the best route and having written instructions down

• But you don’t know if circumstances change – roadworks, accidents, new roads etc)

• A sat nav continually monitors the best way to get where you want to go, making changes as circumstances vary on your route – just like continually understanding your customers

Making changes – the key points

• Make sure you know what change the customer wants – understand it from their point of view – mapping it out can help

• Involve your staff• Tell customers about the change• Ask customers what they think about the change• Keep making changes!

And finally - the 2 mistakes many businesses make

• They have a big project to deliver change, then stop• They forget that it’s usually the small things that annoy people